TMI Blog1992 (5) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of filing fees. The Assessing Officer negatived the claim of the assessee by holding that the expenditure was not admissible as business expenditure. The learned CIT(A) held that the expenditure in question was capital in nature, but amortised the expenditure under s. 35D(2)(c)(iv) of the Act and directed the Assessing Officer to allow 1/10th of the eligible expenditure in the year under consideration. The Department has not come in appeal, but the assessee is in appeal. 4. Shri M.S. Syali, advocate, the learned counsel for the assessee, submitted that there was conflict of judicial opinion on the issue. According to himBombay, Andhra Pradesh,Madras, Kerala and Karnataka High Courts were of the view that the said expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s vehemently argued that the expenditure on filing fees was for the purpose of promoting the business and that s. 35D was not attracted in the present case, because neither the expenditure was incurred before the commencement of the business nor after the commencement of the business for the purpose of extension of the industrial undertaking or in connection with setting up of a new industrial unit. It was, therefore, submitted that the expenditure was allowable as a business expenditure. 5. In the alternative, it was submitted that where two views were possible, the view favourable to the assessee must prevail. 6. The learned Departmental Representative relied on the Delhi High Court decision in the case of Bharat Carbon Ribbon Mfg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii) Mohan Meakin Breweries Ltd. vs. CIT (1979) 11 CTR (HP) 49 : (1979) 117 ITR 501 (HP). 9. From the above it is clear that the majority of the High Courts hold the view that the expenses incurred in connection with the issue of additional equity shares is not revenue expenditure and is not deductible. They also hold that expenses incurred in raising capital are expenses of exactly the same character whether the capital is raised at the floatation of the company or thereafter. We further find that the Delhi High Court decision in the case of Bharat Carbon Ribbon Mfg. Co. Ltd. vs. CIT also lays down that the expenditure incurred with a view to increasing its authorised capital was capital expenditure. The question referred to the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 35D because that is not an issue before us. 11. We, therefore, hold that the IT authorities were justified in holding that the expenditure of Rs. 11,310 was not business expenditure. This issue is, therefore, decided against the assessee. 12. The only other issue is with regard to the upholding of disallowance of Rs. 25,000 under the head staff welfare expenses. 13. The Assessing Officer noticed that as compared to the expenditure of Rs. 1,09,058 incurred as staff welfare expenses in the immediately preceding year, the expenditure for the year under consideration was claimed at Rs. 1,28,696. He found that a sum of Rs. 30,691 had been largely spent on purchase of cashew nuts and sweet boxes. An amount of Rs. 5,400 was, however, spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of "entertainment expenditure" has been enlarged to a very great extent. "Entertainment expenditure" now includes expenditure on provisions of hospitality of every king and is not limited only to provision of ffod or beverages. Even if such expenditure is customary it has to be treated as entertainment expenditure. The giving of sweet boxes and dry-fruits boxes, according to us, even on the Diwali occasion is expenditure on provision of hospitality. The details of the name and particulars of the persons to whom these items have been distributed are also not known. The expenditure of Rs. 1,28,696 is also considerable. The disallowance of Rs. 25,000 out of the said expenditure is quite reasonable and is, therefore, upheld. 18. In the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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